The Impact of Trustees' Age and Representation on Strategic Asset Allocations
73 Pages Posted: 8 Dec 2020
Date Written: December 1, 2020
A board of trustees has the fiduciary duty to invest a pension fund's assets in the best interest of its beneficiaries. Trustees' characteristics should not affect their investment decisions. We find two counterfactual artefacts for corporate pension funds. First, a higher average board age lowers the strategic allocation to equity by 7 percentage points after controlling for the pension fund's characteristics. This way the strategic asset allocation does not fully reflect the beneficiaries' characteristics. Second, pension funds with a greater representation of employers on the board allocate more to equities. This fosters a principal-agent problem between employer trustees and beneficiaries.
Keywords: Pension Funds, Asset Allocation, Pension Fund Governance, Agency Problems
JEL Classification: G11, G23
Suggested Citation: Suggested Citation